The importance of financial management in today’s world cannot be overstated. In fact, it is an important life skill that needs to be passed on to children in an age-appropriate manner. To put it simply, the best way to teach money management to children is by setting the right example for them to follow. While top schools may instill lessons in financial management, here are some important money management lessons for kids that you could teach your children:
1. Start with the basics
Broadly, the earlier you start your child’s financial management lessons, the better it is. For young children, a good starting point is a physical currency, where you teach them about coins & notes & their intrinsic value. As kids grow up, you could introduce them to the concept of banks & savings accounts. With middle/high schoolers, you can also introduce representational currency by way of credit cards.
2. Instill the habit of savings
It is important to teach them from a young age that money isn’t just for spending & that you need to save money as well. In fact, saving teaches the important lessons of discipline as also delayed gratification. When they are young offering them a piggy bank works as a great start. As they get older & you start giving them allowances, encourage them to save a certain sum. At the appropriate time, you can introduce them to a real bank for savings, as opposed to a piggy bank, and teach them how money can grow.
3. Teach them to comparison shop
A good lesson in savings can also arise from comparison shopping. In fact, this is something that they can witness with you firsthand. Make it a point to take them grocery shopping with you as you compare products & evaluate their prices. Before you know it, it will become an intrinsic part of their mental makeup. In fact when the child wants to buy something out of the savings from their allowance, help them come to an informed decision. Early lessons in how to spend money wisely will last them a lifetime.
4. Create opportunities to earn money
Other than giving the kids a certain allowance, encourage them to earn money in an age-appropriate manner by doing chores. This will do several things including instilling an understanding of the labor involved in earning money, teaching them the value of money earned & more. Pro tip- Ensure that the child does not turn the basic responsibilities around the house into a money-earning opportunity.
5. Teach them the importance of giving
Besides earning, spending & saving, you need to instill another very important money management tip, that of giving. Again this is something they will learn best by example. If sharing with the underprivileged is a part of your routine, the lesson will automatically be ingrained in them. Encourage them to set aside a part of their allowance to share with the needy. It is important to show them easy ways to help. Whether it is donating to an animal shelter, an old age home, or an orphanage, offer them options & let them make their own choice. Importantly, teach them that besides donating money it is also important to offer their time.
6. Teach them about credit
With the credit & loan economy taking over the world, it is important that you offer lessons in it in an age-appropriate manner. When your high school kid wants to buy something expensive for example, you could offer a lesson in borrowing from you where they need to pay interest. Lessons such as the need to pay a penalty if they fail to pay by the due date is an important early training in helping them maintain financial discipline as well as understanding their financial objectives. You could also make use of the best finance apps that are available to teach them about using credit responsibly.
Sound financial management is one of the key life skills that you can pass on to your children. Demonstrating good money management skills yourself will be their greatest teacher and will help them pick up valuable lessons in achieving the primary goal of financial management. Done well, you will also help shape a healthy relationship with money where they will see it as a necessity & yet not make it the end objective of their lives. Needless to say that they will not be able to thank you enough once they fly off the nest!